Foxtel subscription costs level off

Foxtel has conceded that the average monthly revenue it earns from each subscriber will not rise substantially over the long term, a result of its new strategy of chasing more customers with lower-priced packages.

“We’re not going to see significant increases of ARPU [average revenue per user] over time," said chief financial officer
Peter Tonagh
.

Since he joined late last year, Foxtel chief executive
Richard Freudenstein
has switched the pay TV operator’s strategy from pushing high-cost packages to offering a bigger range of lower-cost options in order to revive flagging subscriber growth. Although Foxtel’s ARPU was $99 per month in June, it intends to sell more packages in the $70 to $90 a month range. Only 3 per cent of subscribers take the entry level $45 a month package.

Mr Tonagh said Foxtel was now focused on delivering video programming on all platforms – cable/satellite TV, smart TV, smart phone and tablet – to get customer relationships in half of Australian households. Foxtel’s penetration rate of households has stalled at about 26 per cent.

Foxtel had previously insisted customers needed a TV subscription to access content from digital devices, but he said eventually customers would be able to elect what device they wanted to subscribe to.

Foxtel had only had “early discussions" with
News
Ltd about bundling Foxtel products with the media group’s newspapers, he said. “There’s a long way to go yet," he added.

News Ltd chief executive
Kim Williams
, who ran Foxtel for a decade before Mr Freudenstein and is expected to join the Foxtel board soon, wants to bundle newspaper subscriptions with Foxtel offerings.

News is about to increase its stake in Foxtel from 25 per cent to 50 per cent after completing its $2 billion takeover of Consolidated Media Holdings.

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Foxtel’s talks with its other 50 per cent shareholder,
Telstra
, about bundling telco and pay TV products were also at an early stage, said Mr Tonagh. “None of that’s locked in, it’s purely evaluative at this stage," he said. “We’ve got enthusiasm from these guys, previously it was muted."

Foxtel is also experimenting with cutting the number of advertisements on its owned and operated channels, and has halved the ads on Fox 8 and The Comedy Channel. Foxtel will launch its IQ3 set-top box in late 2013, which will enable it to better compete in internet protocol TV.